Tiuke Mahoni of Ma'ufanga had been charged with possession of methamphetamine and cannabis, as well as attempting to distribute them.
But according to a plea from prosecutors, which was also endorsed by outgoing Attorney General 'Aminiasi Kefu, the 55-year-old is too ill to stand trial.
Justice Charles Cato dismissed the case and Mr Mahoni has returned to the United States to continue treatment.
Meanwhile, two high ranking Customs officials have been arrested on drugs charges and are awaiting trial.
In addition, a Ngele'ia man, alleged to be one of the main drug dealers in Tonga, has also been arrested.
Over the past month, the street value of drugs seized by police has surpassed $US4.3 million.